Stock market reduces in size by half in US
The best is the enemy of the good. The increased standards across the western world in public markets is great news for investors, but it has also driven many firms to de-list from public markets.
The number of US listed companies has shrunk by half since 1996, and you can find a similar collapse in the UK and parts of Western Europe. Declining appetite for IPOs and consistently higher numbers of companies delisting (mainly due to mergers and acquisitions) are to blame.
Cheap debt and more accessible and scalable private sources are eating up market share. Crowdfunding, rich individuals and Dragons den style pitches encourage investors to lend money at tax deductible interest rates convertible to equity on contingent events (so called Co-co’s).
Over two million companies were established in the UK in the last twenty years, Net of closures, but the number of companies with 50 or more employees increases at just 460 pa.. Companies are somehow financing themselves differently than in the past – and the PLC market is no longer pre-eminent.
Maybe the seeds of Woodford were sown in this general move to private unlisted securities? Is this the driver to the illiquid prices, that dominate Absolute return funds, but do not have the public market liquidity available in public markets? If so, then you’ll need to keep a keen eye on the Woodford developments.